Gold retreats in Pakistan as rupee maintains upper hand

• Gold price settles at Rs146,300 per tola after losing Rs200.
• Investors are nervous ahead of monetary policy announcement.
• SBP's monetary policy announcement is due on October 10.

KARACHI: Gold prices reversed course and fell on Monday as the rupee continued strengthening, while investors shifted their attention to the upcoming Monetary Policy Committee (MPC) meeting for cues on the State Bank of Pakistan’s interest rate strategy.

Data released by All Pakistan Sarafa Gems and Jewellers Association (APSGJA) showed that the gold price declined by Rs200 per tola and Rs171 per 10 grams to settle at Rs146,300 per tola and Rs125,429 per 10 grams, respectively.

Initially, gold was showing signs it was possibly stabilising, but investors are still nervous ahead of the monetary policy announcement on how aggressive the central bank will be.

The rupee strength is hurting gold even though the precious metal is regaining shine in the international market. However, local investors will not immediately jump back into gold.

Investors, who were awaiting September's inflation data to gauge its likely impact on the SBP’s rate hike plans, are now eyeing the MPC’s decision due on Monday (October 10).

Gold is considered a hedge against inflation and economic uncertainties. However, it is highly sensitive to rising interest rates, which raise the opportunity cost of holding non-interest-bearing bullion.

In the international market, the price of the yellow metal rose by $5 per ounce settling at $1,666.

Gold rates in Pakistan are around Rs2,000 below the cost compared to the rate in the Dubai market.

Meanwhile, silver prices in the domestic market remained unchanged at Rs1,560 per tola and Rs1,337.44 per 10 grams.

With gold under pressure, silver should also continue to struggle to outperform but a clear positive turn in gold holds considerable risks for silver.